CES 2018: Lyft Teams with Waymo for Self Driving Cars

■ Yesterday, ride-hailing company Lyft (Private), and self-driving software company Aptiv (APTV-$86.11:NR), announced that they will demonstrate an autonomous ride-hailing experience at the CES show in Las Vegas next week. The car will have a human driver as a safety backup, and the routes, over 20, will be pre-defined. Lyft launched a pilot self-driving program with nuTonomy, which was purchased by Aptiv, last month. Both Lyft and Uber are actively pursuing self-driving technology with the aim of reducing the need for human drivers. Eliminating human drivers will drive their models to profitability quickly. Lyft has also partnered with Alphabet’s Waymo and several OEMs to make fully self-driving cars (without a human safety backup driver) a reality. Waymo has been testing self-driving rides for several months in the Phoenix metropolitan area through its Early Rider Program.

■ See our recent note on Waymo, “Waymo: Alphabet’s Next Billion Dollare Disruptor”. We believe Waymo is in the pole position to both lead and dominate the emerging self-driving/Autonomous Vehicle (AV) industry. We see Waymo building out a significant business that could generate near $5 billion in revenues by 2025. By 2035, we see Waymo generating over $30 billion in revenue. Our estimates are very conservative given the sizable industry TAM ($7T). Waymo could ultimately be Alphabet’s first spin-off.